Residents of Elk Grove are spending money again as economy recovers

Alexis Thompson doesn’t need charts and graphs; she can tell by looking out at the parking lot of the shopping center where she works. Matt Bassett sees it in the new cars rolling out of his showroom.

People are spending money again in Elk Grove, which boomed into Sacramento’s largest suburb in the 1990s and 2000s – before the housing market crash turned it into a hub of the nation’s foreclosure crisis.

“We’re just now getting to where sales tax levels were before the recession hit in 2008,” said Elk Grove City Manager Laura Gill. “Slowly, but surely, we’re climbing out of recession. It’s going to get better as we go along.”

Retail spending is life blood to Elk Grove, which receives nearly two-fifths of its general fund from sales-tax revenue – money that goes toward roads and police, trash and traffic, children’s and community services.

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Empty storefronts once pocked the city’s wide commercial thoroughfares after major chains such as Borders and Circuit City collapsed in the retail crash. Auto sales sank as falling home values and layoffs sapped customers’ spending power.

Today, a retailer would be hard-pressed to find sales space in the city. Just 8 percent of Elk Grove storefronts were vacant in the final quarter of 2013, according to commercial real estate firm Cassidy Turley. Elk Grove’s unemployment rate, which peaked at nearly 11 percent in 2010, was estimated at 6.6 percent in February, according to the state Employment Development Department.

Auto sales also are climbing back.

“We’re selling a lot of cars, getting a lot more traffic. Numbers are up and volume’s up,” said Bassett, general manager of Mazda of Elk Grove. “It’s a great time to be in the car business.”

That’s no small thing. Elk Grove Auto Mall is a prime engine of the city’s economy and home to nearly half the city’s top 25 producing businesses. Elk Grove recorded more than $1.8 billion in taxable sales in 2013, according to city financial records. Of that, more than $492 million came from sales at the auto mall. The 21 dealerships at the auto mall accounted for 12 percent of the nearly $53 million in general fund revenue collected by the city in 2012-13, Gill said.

Auto sales are still below the city’s 2006 peak of $551 million but are returning to pre-recession levels.

Bassett said his customers have more disposable income now. Chastened by recession, they are saving more, coming to the showroom with better credit scores and putting more cash down on their auto purchases – a good sign that they have more money to spend, he said. Pent-up post-recession demand has also boosted sales.

Still, the recession scarred the landscape in Elk Grove, where the skeleton of the city’s planned Promenade shopping mall along Highway 99 near Grant Line Road sits partially built amid overgrown parking lots. It is a constant reminder of when the boom went bad.

Even here, though, there may be movement. New owner Howard Hughes Corp. is working to repurpose the property as an outlet center, with plans to open in 2015.

Hughes is “busy working to secure lease commitments from retailers,” Gill said. “They’re working with city staff pretty continuously. The level of interest for Howard Hughes is much better than it was a year or two ago.”

Abby Friedman, a research manager at real estate firm Cassidy Turley, is watching the developments surrounding the outlet mall.

“Retail, overall, is starting to improve. If (Elk Grove) gets the outlet center, that would improve things a lot and would spur more growth,” drawing customers not only from the Sacramento area, but to the south from Lodi, Stockton and Modesto, Friedman said.

It’s not the destination shopping mall Elk Grove hoped it would be, a rival to Roseville’s Westfield Galleria. But while the Promenade sat, the recession that gripped the region eased, and mid-tier retailers including Stein Mart and Designer Shoe Warehouse moved to smaller strip centers around Elk Grove.

More shops, more shoppers and more money staying in town. That’s sales associate Alexis Thompson’s view from Shoe Daca, an independent shoe store in Elk Grove’s Laguna Gateway shopping center at Laguna and West Stockton boulevards, home to a Home Depot, TJ Maxx and Old Navy, among other tenants.

“It’s gotten a lot busier. I’m seeing that local businesses are starting to open up and that convenience has become a priority for people. Convenience is key,” Thompson of Elk Grove said. “I have a hard time parking even in the morning.”

Shoppers still head out of town to Arden Fair and the Roseville Galleria, but Elk Grove’s retail landscape is maturing, and, with more shopping options, Elk Grove residents are staying closer to home.

“It’s a tight market now for retail,” Gill said. “And that’s a good thing.”